Drug Firms See Poorer Nations as Sales Cure

Monday, July 20, 2009

Julio Rodriguez was on a sales call at a clinic in this slum overlooking Caracas recently when he heard four gunshots go off nearby.

It was business as usual for Mr. Rodriguez. As a representative in Venezuela for U.S. pharmaceutical giant Pfizer Inc., his sales route takes him through one of Latin America’s most dangerous neighborhoods. To avoid attracting attention, he wears a polo shirt with a red logo, the color worn by supporters of President Hugo Chávez.

Mr. Rodriguez is part of a strategic shift in the $770 billion pharmaceutical industry to target the working poor in the developing world.

For the first time in a half-century, sales of prescription drugs are forecast to decline this year in the U.S., historically the industry’s biggest and most profitable market. The Obama administration and Congress’s attempt to pass legislation overhauling the health-care system, including provisions that could lower the cost of medicine, could put drug makers’ U.S. businesses under further pressure.

As a result, developing countries like Venezuela have begun to look more attractive to the industry. Sales of prescription drugs in emerging markets reached $152.7 billion in 2008, up from $67.2 billion in 2003, according to IMS Health, which tracks the industry. IMS forecasts sales will climb to $265 billion by 2013.

With a handful of other drug makers, including the U.K.’s GlaxoSmithKline PLC, Switzerland’s Novartis AG and France’s Sanofi-Aventis SA, Pfizer is making a big push into the developing world. In addition to Venezuela, the company is expanding in China, India, Brazil, Russia and Turkey. Pfizer brought in $1.4 billion in sales from emerging markets in the first quarter of this year. That’s a fraction of its $10.8 billion in overall sales in the same quarter, but a slice Pfizer says it’s determined to expand.

Until recently, drug companies doing business in emerging economies have catered mostly to the wealthy and middle class. Now, Pfizer is turning to what it calls, in internal marketing discussions, the “bottom of the pyramid.”